1957 (11) TMI 13 - HC - VAT and Sales Tax

Summary

Issues Involved: Tax liability on sales of hides and skins under various contracts, determination of whether sales were export sales or sales in the course of export, and applicability of Article 286 of the Constitution.

Detailed Analysis:

1. Sales to Gordon Woodroffe and Co. and Madras Hides and Skins Exporters Ltd.:
The petitioner argued that these sales were export sales and thus exempt under Article 286 of the Constitution. The contracts specified that the property in the goods passed to the vendees only after the delivery of the shipping documents. The court referred to its previous judgment in Gandhi Sons, Ltd. v. State of Madras, which established that if the property in the goods does not pass until the shipping documents are presented, the sale is in the course of export. The court found that the property in the goods sold to these companies passed only after the goods crossed the customs barrier, thus qualifying as sales in the course of export. Consequently, the turnover of Rs. 1,80,925-2-10 and Rs. 1,19,846-10-2 were exempt from tax liability.

2. Sales to Rallis (India) Ltd.:
The contracts with Rallis (India) Ltd. indicated that the sales were completed at Madras, with delivery at the buyer's godowns in Madras. The petitioner contended that these were export sales, but the court found that the sales were completed before export, with Rallis (India) Ltd. being the exporter. The court emphasized that there was no privity of contract between the petitioner and the foreign buyers. The terms of payment and other conditions did not alter the fact that the title to the goods passed at Madras. Thus, the sales were not covered by Article 286 and were liable to be taxed.

3. Sales to South Indian Export Company Ltd., Anwar and Co., and Best and Co. Ltd.:
The contracts with these companies followed a similar pattern, indicating that the sales were completed at Madras. The court reiterated that the price quoted as C.I.F. London was merely a method of computing the price and did not affect the transfer of title. The sales were completed by delivery at Madras, and the buyers were the exporters. These sales were not export sales or sales in the course of export and were therefore taxable.

4. Sales to Haji Abdul Wahab and Sons:
The petitioner failed to produce any contract with Haji Abdul Wahab and Sons. The court noted that the account books indicated purchases by Abdul Wahab from the petitioner, with the price computed after deductions for shipping charges. The court concluded that these were sales for export by the buyer and not covered by Article 286. The absence of material evidence led to the rejection of the petitioner's claim.

5. Argument on acceptance of goods by foreign buyers:
The petitioner argued that the sales were completed only upon acceptance of the goods by foreign buyers. The court found no privity of contract between the petitioner and the ultimate foreign buyers. The contracts provided for reimbursement if goods were rejected, but this did not affect the completion of sales at Madras. The sales were completed by delivery to the firms at Madras, and the turnover was taxable.

Conclusion:
The court allowed the revision in part, exempting the turnover from sales to Gordon Woodroffe and Co. and Madras Hides and Skins Exporters Ltd. from tax liability. The rest of the petitioner's claims failed, and the turnover from sales to Rallis (India) Ltd., South Indian Export Company Ltd., Anwar and Co., Best and Co. Ltd., and Haji Abdul Wahab and Sons remained taxable. Each party bore its own costs.